The Big Squeeze

If you want to set me off on a rant, just ask me about wine in restaurants. Not all restaurants, of course, but many of them. All I want is a wine list that is appropriate to the food being served — intelligent selections matched to the cuisine with options at appropriate price points. It doesn’t seem like too much to ask for. It is surprising how often I am frustrated.

I had dinner at a famous Pacific Northwest seafood restaurant earlier this week and I wanted to order a nice wine by the glass (the university was paying so due economy was observed). The choices were affordable enough, but the selection was awful. The only Sauvignon Blanc on offer, for example, was an industrial California wine that was served at room temperature. It added nothing to the meal except alcohol and that’s not what I was looking for. In terms of cost per glass to the restaurant it was probably a few pennies cheaper than a better California or Washington wine or something interesting from Chile, South Africa or New Zealand.

Those wine cost pennies must be pretty important to the restaurant, I guess, for them to make such a severe sacrifice in quality. I would have been happy to pay more for a better wine but was not given the option.

When I dined at a famous Portland restaurant earlier this year the problem was just the opposite. The wine list was interesting enough and included a number of unusual Oregon wines, but it was priced in the stratosphere. An ordinary wine that you could buy in a grocery store was priced at more than twice the cost of a typical entree. Interesting wines bore disproportionate price tags. Another missed opportunity for me to enjoy an interesting wine with my meal and for the restaurant to engage me more completely in the wining/dining experience. I won’t be back.

Who’s Squeezing Whom?

I feel like I am being squeezed as a restaurant wine consumer, but I am starting to realize that the Big Squeeze isn’t on me, it is on the restaurants themselves. A recent article in the Wall Street Journal explains the situation pretty well. As usual it is all about demand and supply.

We have moved into what looks a lot like a recession and this is having a predictable impact on the demand for restaurant meals. Many restaurants in my region are going out of their way to advertise “earlybird” dinner specials in an attempt to entice discretionary customers with discount menus.

At the same time, and this is what the WSJ article emphasizes, the cost of restaurant food is rising as a direct result of rising food costs in global markets. An article in the Economist explained the problem in December 2007. Rising demand as consumers in less developed countries spend their rising incomes on more and better food. Falling market supply as rich countries divert grain from the food chain to the gas pump. Something has to give and it is price. The situation has only gotten worse since the Economist article was published. Restaurants are squeezed pretty badly by falling demand and rising costs. Food costs seem to have replaced labor costs as the critical economic determinant of the bottom line for at least some eateries. The WSJ makes interesting reading when it describes how chefs are reconfiguring even high end recipes and menus in order to shave a bit off the cost of raw materials such as meat, fish and poultry.

False Economy?

A warning: reading the article could affect how much you enjoy your next restaurant meal. I can’t look at my plate now without wondering to what extent the chef’s choices were driven by cost versus flavor. Why were there boiled red potatoes (instead of risotto) on that $30 plate of grilled halibut? Are potatoes cheaper? And are boiled reds more expensive than the smashed potatoes on the $20 prawn special? Or were those smashed potatoes recycled from last night’s leftover boiled spuds?

Cost has always been a factor, of course, but now it seems that every penny counts. Your dinner plate is a waiting economic detective story.

So I guess that I shouldn’t be surprised that restaurants are passing their cost squeeze onto me via the wine list by shaving a few pennies off the cost of inexpensive wines when they can (by moving to down-market labels) and raising the price of premium wine when they dare. If they think that the demand for good wine in restaurants is inelastic, then higher prices are the way to go. It’s a tricky game, however, because the wrong strategy can produce lower sales revenues and fewer wine-enthusiast diners.

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One response

I seldom by wine at a restaurant. What I have in my cellar is so often superior to what they have. My cellar is not by design for expensive wines to age, as much as for always having something available for any occasion. No restaurant in Washington State should have to over charge for a decent wine. There is no need for them to maintain an expensive cellar (unless they are one of our ‘great’ restaurants), they can buy for the State Stores any day of the week, and have standing orders of very good value wines. In fact the cellar of a moderately high quality restaurant need only have about a week’s supply at any given time.

The Wine Economist

What would you get if you crossed the Wine Spectator, America's best-selling wine magazine, with the Economist, the world's leading business weekly? The answer is this blog, The Wine Economist, which analyzes and interprets today's global wine markets. Staff: Mike Veseth (editor-in-chief) & Sue Veseth (contributing editor).